Luxembourg implements the EU Mobility Directive: new regimes for corporate cross-border mobility

Purpose of the Mobility Directive and Luxembourg’s legislative response

The Mobility Directive constitutes an additional step in harmonising the legal regime applicable to cross-border transactions within the European Union (“EU”) (and, more broadly, the European Economic Area (“EEA”)). While the EU regime for cross-border mergers was implemented nearly twenty years ago ^[3], the Mobility Directive aims at (i) further improving and facilitating company mobility through the implementation of a similar (yet ‘improved’) regime for cross-border divisions (or demergers) and conversions (also known as transformations or migrations) while (ii) implementing a somehow uniform and enhanced level of protection for all stakeholders (employees, creditors, shareholders…).

In keeping with its tradition of transposing “the whole directive, nothing but the directive”, Luxembourg has once again made use of all the options and all the latitude left to the Member States by the Mobility Directive to put in place a system that remains as favourable as possible to cross-border mobility to stay faithful to Luxembourg's legal tradition in company law and preserve its attractiveness and competitiveness. The scope of the new regimes resulting from the Mobility Directive has, therefore, been restricted to what is strictly necessary and shall not extend to other cross-border operations, such as cross-border conversions involving third countries or cross-border divisions by absorption.

Scope and overview of main changes

Considering the above-described objectives, Luxembourg’s legislator took the decision to create a special regime for cross-border operations strictly falling within the scope of the Mobility Directive (the “Special Regime”), i.e. for the following cross-border operations taking place within the EU and the EEA:

1. mergers by acquisition or by incorporation of new company/ies;
2. divisions by incorporation of new company/ies (partial or complete) and divisions by separation ^[4];to the extent such operations involve at least one company from another Member State of a qualifying type (as per article 119, paragraph 1 of Directive 2017/1132) and at least one qualifying Luxembourg company ^[5] (each a “Qualifying EU Company”):

• • public company limited by shares (SA – société anonyme); or
  • partnership limited by shares (SCA – société en commandite par actions); or
  • private limited liability company (SARL - société à responsabilité limitée).

3. conversions whereby a Qualifying EU Company, without being dissolved or wound up or going into liquidation, converts the legal form under which it is registered in a departure Member State into a qualifying legal form of the destination Member State and transfers at least its registered office to the destination Member State, while retaining its legal personality.

On the contrary, all operations falling outside the Mobility Directive’s scope shall not be subject to the Special Regime and shall remain governed by the existing general regime applicable to such operations and transactions (the “General Regime”), as updated by the New Law. Those might include:

• domestic and cross-border mergers, divisions and conversions involving third-party countries only;
• cross-border divisions by acquisition (even when involving a Luxembourg SA, SCA or SARL and a Qualifying EU Company – as per the exclusion from the scope of the Mobility Directive);
• generally, all cross-border mergers, divisions, and conversions involving non-qualifying Luxembourg and EU companies (e.g., a cross-border operation involving a Luxembourg entity of another legal form and another non-qualifying EU entity).

Main changes introduced through the special regime and update to the general regime

SPECIAL REGIME

The main evolution driven by the Mobility Directive is necessarily the creation of an EU regime for cross-border divisions (except for divisions by absorption) and conversions aligned mainly on the pre-existing regime for EU cross-border mergers. This Special Regime shall, therefore, extend the requirements for inter alia the publication of draft terms of conversion/division, waiting periods between the publication of the draft terms and the effectiveness of the conversion/division, and additional rights to the stakeholders. However, this Special Regime for EU cross-border mobility introduced by the Mobility Directive and transposed by the New Law has also seen several key changes (changes marked with a "■" also apply to the General Regime (see below)):

• Anti-abuse test and two-level control: The Special Regime requires competent authorities in each Member State to control EU cross-border operations. In Luxembourg, the New Law has designated notaries for such purposes.
  • In practice, the competent authority from the departing state will have to carry out an initial legality check, notably to ensure that the operation is not initiated for abusive purposes. In case and once all conditions are met, the competent authority should issue a “pre-operation” certificate, which will be transmitted to the destination state through the newly established BRIS (Business Registers Interconnection System);
  • The competent authority from the destination state will then check the operation's legality from the destination jurisdiction’s perspective and compliance with local laws.

• Additional stakeholders’ rights: Shareholders, creditors and employees will now have additional rights in the context of EU cross-border operations, such as:
  • Enhanced information rights: Management bodies must now provide detailed explanatory reports for the benefit of employees and shareholders. Under the current regime, this report was only prepared for the benefit of the shareholders when they had not waived it.
    Additionally, notices must now be prepared and published to inform shareholders, creditors, and employee representatives about the opportunity to submit comments on the draft terms.

• • Enhanced shareholders’ protection: dissenting shareholders shall (a) have the possibility to challenge exchange ratios and (b) now benefit from an exit right with related cash compensation in case of opposition to the operation.

• Simplifications and exemptions for single-shareholder companies: Companies with only one shareholder are (now) automatically exempt from various requirements (e.g., less detailed draft terms, no independent expert report);
• Acknowledgement of additional forms of simplified mergers: the New Law includes a definition of certain simplified forms of mergers by absorption, which are characterised by the absence of any exchange of shares or corporate units where the merger is carried out by a person who directly or indirectly holds all the shares in the merging companies or where the shareholders of the merging companies hold their securities and shares in the same proportion in all the merging companies. Such an extended regime allows for operations such as upstream mergers, side-stream mergers and downstream or reversed mergers to benefit from a simplified regime with reduced requirements and formalities.

UPDATE TO THE GENERAL REGIME

Luxembourg's lawmakers also profited from the Mobility Directive to update the General Regime and replicate specific improvements brought in by the Mobility Directive (in the Special Regime). Such updates primarily aim at streamlining and improving the General Regime:

• Simplifications and exemptions for single-shareholder companies (see above)
• Acknowledgement of additional forms of simplified mergers (see above)
• Clarifications as regards draft terms: the New Law updates the minimum content for draft terms and details the process to be followed in case of amendment to the draft terms after publication;
• Clarifications as regards effects of operations: the New Law also clarifies that (i) the effectiveness of a cross-border operation may be made subject to conditions precedent of any form and (ii) the universal transfer of patrimony (transmission universelle du patrimoine – or so-called TUP) shall entail the transfer of all the rights and obligations of the absorbed company, including intuitu personae contracts and criminal and administrative sanctions.

Entry into force and transitional period

The New Law shall enter into force on the fourth day following its publication in the Mémorial A, which is 2 March 2025.

However, the New Law provides that the new provisions will only apply to EU cross-border operations for which the draft terms will be published from the first day following the month of the New Law’s publication (i.e. from 1 April 2025) so that operations for which draft terms have been published before that date but have not been completed will remain subject to the current rules.

What’s next

As the Parliament passed a specific motion, the government should carry out a comprehensive qualitative assessment of the New Law, particularly focusing on the anti-abuse test enforced by notaries, more than a year after its entry into force to determine if adjustments to the legal framework may be necessary.

On the other hand, the transposition of the labour law aspects of the Mobility Directive is still pending, with bill of law n°8225 amending the Labour Code still awaiting approval by the Parliament.

April 2025 update: The implementation of the Mobility Directive in Luxembourg Law is now complete with the publication of the Law of 25 March 2025 amending the Labour Code for the purposes of transposing the Mobility Directive (the “New Labour Law”). The New Labour Law, which entered into force on 1 April 2025, implements new provisions in the Luxembourg Labour Code applicable to companies with over 800 employees involved in EU cross-border mergers, divisions and conversions subject to the Special Regime. It notably provides for new rules strengthening information and participation rights of employees.

If you have any questions, please contact your trusted advisor at Tiberghien Luxembourg or any of the authors of this publication.

^[1] Article 3 of the Mobility Directive provided that Member States had until 31 January 2023 to transpose.

^[2] Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law.

^[3] Through Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies (repealed by Directive (EU) 2017/1132).

^[4] N.B.: Division(s) by acquisition have been explicitly excluded from the scope of the Mobility Directive as those were deemed too complex by the EU (and, therefore, from the scope of the Special Regime)

^[5] N.B.: Some companies are excluded from such Special Regime irrespective of the form they are organised under, such as cooperative companies (even when organised as SAs), companies in liquidation and which have begun to distribute assets to their members, companies the object of which is the collective investment of capital provided by the public (under certain conditions), etc.